China has a very negative reputation for its local companies freely infringing on the Intellectual Property (“IP”) Rights of the foreign companies that conduct business in China as either buyers or sellers of products. To a large degree, this negative reputation is deserved based on past practices in the country.
China also has a negative reputation for having a lax enforcement regime for protecting IP Rights – especially the IP Rights of foreign companies. This negative reputation is far less deserved – especially with the significant IP-related legal changes and increased enforcement that have been instituted by the Chinese Government within the past 24 months.
While IP infringement of any kind is not acceptable, it is important for foreign companies doing business in China to understand that often times it is their own failure to take some fundamentally basic actions that opens the door for those who infringe on their IP. The lack of action by most companies is most likely due to a misunderstanding on the part of the foreign companies as to how IP is addressed within the Chinese Legal framework.
For example – related to Trademarks – did you know that China is a “first-to-file” jurisdiction whereby a party can obtain ownership of a Trademark merely by filing an application to register it? The party requesting the registration is not required to show evidence of use of the Trademark. There are major implications associated with this for foreign companies.
The Government of the USA has realized that many companies in their country do not have a good understanding of how IP is protected in China, or of what they need to do to help themselves protect their own IP. As a result, the US Government put together a comprehensive document called the “China Intellectual Property Rights Toolkit” to help US companies understand what they should do to protect their IP (see https://www.stopfakes.gov/IPR-Toolkits). While written specifically for a USA-based audience, there is key information in the document that generally applies to any company located outside of China, and therefore I am going to draw reference to information in it that I believe is very important for you to note.
The first, and most important thing to understand is that the Chinese IP Legal system is different than that of the USA, and other foreign countries, and that registration of IP rights in your home country does NOT automatically confer those same IP rights in China. It is very important to become familiar with the differences between the IP Legal systems in your home country and in China and to then develop and implement a comprehensive strategy for protecting your IP in China.
The second most important things to understand is that there are different classes of IP rights and that each class needs to be handled somewhat differently when it comes to registration and enforcement of your rights in China. Those major IP classes of IP are:
- Trademarks (including Trade Dress)
- Trade Secrets
The third most important thing to understand is that in order to properly protect your IP rights in China, you will need to engage the services of a trusted agent in China who can help you navigate through the different processes required to register your IP, monitor for infringement of your IP, and if needed, to enforce your IP rights against any who infringe them.
While your government may be able to provide some resources to assist you with protecting and enforcing your IP rights, it will ultimately be up to you to take the required actions. Most companies do not have the internal abilities to navigate the processes and the paperwork in China, so they will need to find a local partner in China (e.g. Victure) who can connect them to the correct local resources and ensure that all required IP registration / enforcement activities are completed in a correct and timely manner.
Depending on your business model, you may need to address only one of the IP classes noted above, or you may need to address several of them.
For example, if you are in the e-commerce space where you are buying and reselling products designed by others, you will definitely want to protect your Trademark IP and maybe also any related Trade Dress IP. However, you likely won’t have any Patents, Trade Secrets, or Copyrights to protect.
On the other hand, if you are involved in manufacturing in China by having products made to your design by Chinese companies, or by running your own manufacturing facility in China, you will definitely want to protect your Patents and Trade Secrets in addition to protecting your Trademark IP and any related Trade Dress IP.
The topic of IP protection is very broad and there is much to consider – depending, as noted above, on what your business model is. For purposes of concluding this introductory article, here are some general considerations, courtesy of the US Government, for protecting your IP rights in China:
- You cannot protect your IP unless it is registered.
- Register your Trademarks, Patents, and Copyrights in your home country, China, and wherever else you currently do business, or THINK you will do business in future.
- BEFORE you go into China to talk about a potential business relationship or attend a trade show, work with IP counsel and/or other qualified parties to develop an overall intellectual property rights protection strategy.
- Do not disclose any IP to anyone until it is registered in China.
- Do not depend on confidentiality, noncompetition, or non-solicitation contracts to protect you against loss of IP or key employees in China.
- BE SURE, however, that your potential partner(s) and employees enter into such contracts with you, but do not assume these contracts will protect you effectively.
- DO also be prepared to take action (and spend money) to enforce such contracts.
- Conduct due diligence of potential Chinese partners. Vet them thoroughly, and continue to monitor them – even after a relationship has been established.
There is no guarantee that taking the actions above will prevent your IP from being infringed in China, but if you have taken the appropriate steps to register it in China prior to the infringement occurring, there is a high probability that you will be able to obtain the appropriate redress against those who commit the infringement. Remember, forewarned is forearmed.
Join the following groups for your IP discussion and sourcing needs-
China Sourcing- https://www.linkedin.com/groups/4462099/
India Sourcing- https://www.linkedin.com/groups/8454669/
Vietnam Sourcing- https://www.linkedin.com/groups/8815822/
Asia Sourcing- https://www.linkedin.com/groups/8909383/
Gifts and Premiums- https://www.linkedin.com/groups/4421652/
Circular Economy- https://www.linkedin.com/groups/13908783/